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We hope you find the articles on our blog informative and helpful. You are always welcome to chat with us if you have any questions about your personal financial situation.

De-Fi: What is it & How It Is Changing the Financial Landscape?

De-FI is an abbreviation for Decentralised Finance and it is changing the global financial landscape. So, what exactly is decentralized finance? De-Fi has arisen in sync with the blockchain revolution and a smart contract platform called "Ethereum" which is an entire universe or the first world computer providing a base technology layer on which every conceivable application is being built to transact business in a secure, borderless and efficient manner. Decentralized Finance or the ability to trade stock, token or asset transactions on decentralized exchanges "peer to peer" without a middleman such as a traditional stock exchange, dramatically lowers the fee structure of what you would pay on a traditional exchange.  

You can now trade stocks, tokens and soon, every type of commodity, asset and collectable "peer to peer" directly without a "trusted middle party" e.g. a bank or stock exchange.These new decentralized platforms also known as DEX's are "Peer to Peer" and "trustless" meaning they do not require Person A knowing and trusting Person B to make a trade or exchange. The Decentralized Exchange (DEX) itself provides the mechanism for a secure exchange.

The Gamestop debacle has opened people's eyes to the fact that not only are "free trading" platforms such as Robinhood not free, they are also subject to censorship rendering the retail investor powerless when it suits the centralized exchanges. Retail buyers and sellers may not know it, but they pay a mark-up or mark-down in the price of any financial instrument (when they buy or sell) essentially paying a premiium for each transaction which is pocketed by the exchange and its partners. Furthermore, as Gamestop investors found out, once losses to a select number of hedge funds became too acute, Robinhood stepped in - under pressure from its peers - to halt or limit trading to the detriment of retail investors.

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Wealth Management Plans While Markets Sour

If you have been reading the market headlines this week, Gamestop and AMC's meteoric stock price increases have been in the news as the "revenge of retail" makes it's mark on the hedge fund industry. This incident has rattled the markets along with a more circumspect re-examination of expectations for a second half 2021 economic recovery given the new South Africa COVID-19 variant and delays in the vaccination supply. The dizzying rallies in Gamestop alongside new market highs and souring expectations has given pause for thought. Have the markets come too far, too soon!

In one of our earlier articles, we outlined why we think that 2021 could be a strong year for the market based on the massive stimulus that has been injected into the economy coupled with close to zero interest rates. We also noted that delays with the vaccination roll out and potential mutations could prolong the "COVID Blues" and delay an expected economic recovery. There are other potential issues such as an escalation of economic tensions with China. These "uncertainties" provide ample fodder for market corrections in a likely continuation of the bull market.

One Professor, Jeremy Siegel, author of "Stocks for the long run" shares a similar ooutlook and is not blinking an eye in the midst of this market correction, standing firm with his latest prediction that the Dow will reach at least 35,000 in 2021.

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Market Trends for 2021 Part Two

Last week we wrote about trends that we think will continue into 2021 from 2020. Big technology shifts across AI, 5G, IOT, Blockchain and so forth are going to disrupt and accelerate change across many industries. Banking & Finance is one industry for example that is being challenged by the growing defi (decentralized finance) markets which now have north of $20 billion of assets in their ecosystem. We expect this trend to innovate and grow rapidly providing a growing number of options and products to serve the market.

With a new incoming administration, the stimulus packages will continue. Aside from the growing national debt and its staggering size, this continued onslaught of money flooding into the economy will continue to fuel inflation and devalue the US dollar. The latter alongside low interest rates will force asset managers and every day investors and retirees to seek yield that can offset the loss in value of holding cash.

1. The enormous injection of monies into the economy will cause most quality hard assets to rise in value

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Market Trends for 2021

First of all, Happy New Year to you! May we all look forward to seeing COVID in the rear mirror at some point in 2021. No doubt, getting enough of the population vaccinated will take longer than we all hope, but it will happen and science will help us put COVID behind us. There is a known variant circulating, first identified in South Afria and then in the UK and Europe and now in the USA. While it is not certain whether the current vaccines on the market account for this variant, they will find a vaccine for this one too if the current vaccines do not.

Due to the inevitable mutations of viruses, it is quite possible (but still unknown) that we may need to get a COVID vaccine each year to ensure we have maximum protection from potential variants. While this is something none of us look forward to, it is no doubt better than the alternative. Obviously medical science is far from perfect and there will always be a small percentage of people who have adverse events to any vaccine. However this is just about the case with every medicine on the planet. The majority will benefit.

The certainty of a vaccine alongside a more unknown supply and vaccination schedule means it is just a matter of time before we return to a new normal. How much time is the unknown.

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Happy Holidays!

We want to take this opportunity to wish all our clients and readers a Very Happy Holiday!

There are 6 Trillion reasons and counting why 2021 is shaping up to be a positive year for many asset classes.

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Hawley Advisors
1600 South Main Street, Suite 190
Walnut Creek, CA 94596
Phone: 925-906-9800
Fax: 925-906-9884
info@hawleyadvisors.com

 

 

Hawley Advisors is an investment advisor, registered with the State of California. Any investment ideas or strategies on this website are for the purposes of education and general information only and should not be construed as specific investment advice. For more information about our firm please check the SEC Public Disclosure website: https://www.adviserinfo.sec.gov/

 

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